NY Budget Gives New Life To "Temporary" Taxes

ALBANY, N.Y. - A $350 rebate check for many New York families. Extended taxes on millionaires and utilities. The continuation of a middle-class tax cut.

Gov. Andrew Cuomo and legislative leaders hailed the state's new $135 billion budget as a "net tax cut" with "no new taxes and fees" when the Legislature passed it overwhelmingly late last month.

But whether or not the spending plan cuts or increases taxes has been the subject of interpretation over the last two weeks, with different answers coming from all sides of the political spectrum.

"We did a tax cut for middle class families. We did a tax cut for businesses to spur the economy," Cuomo said Friday on WOR-AM (710) in Manhattan. "We greatly limited the growth of government to about 2 percent, which is about half the normal rate."

When announcing a budget deal in March, Cuomo and his aides made the case that for the 2013-14 and 2014-15 fiscal years, the amount of taxes cut was higher than the amount of taxes raised. That includes about $400 million the state will spend on mailing rebate checks next year to households with at least one child under 18.

A March news release touting the budget boasts of "$1.23 billion in new tax cuts for middle class families over three years" and "$800 million in tax relief" for businesses, including credits to employers for hiring veterans and young workers.

But the budget also includes an extension of an assessment fee on utilities and power providers that was set to expire in April 2014. Instead, the fee will gradually decrease until it expires in 2017, boosting the state's coffers by $500 million this year.

The tax tweaks and changes will span the next several years, including the continuation of income-tax rates that will now stretch through 2017. The rates -- which include a higher rate on millionaires and a lower rate for middle-class wage earners -- were set to expire at the end of 2014, provide the state with an additional $2 billion in revenue each year.

Business groups in particular have been critical of the tax extensions, as well as an increase in the minimum wage to $9 an hour by 2016. It is currently $7.25.

"When we have analyzed the budget and looked at when the governor says this is a tax decrease -- no," said Mike Durant, state director of the National Federation of Independent Business. "The statistics bear out that New York is still the least friendly for small business."

Cuomo's administration has tried to sell the merits of the budget to the state's business organizations.

The governor and top administrative officials, including Lt. Gov Robert Duffy and Budget Director Robert Megna, hosted prominent statewide business groups at the Executive Mansion the day the budget passed, taking questions after they gave a presentation on the merits of the spending plan.

On an upstate swing last week, Cuomo highlighted the tax cuts and credits for businesses, saying they send the message that New York is improving its climate.

"We're reducing taxes, so stay with us," Cuomo said Tuesday in Buffalo. "That's what we're doing with this budget: We bring down small business tax, we bring down manufacturing taxes on businesses."

E.J. McMahon, a senior fellow at the fiscally conservative Empire Center for New York State Policy, said the spending plan increases more taxes than it cuts, regardless of whether you're looking at a single year or multiple years.

"On a net basis -- whether you value it over five years or look at the year that everything peaks -- it's a tax increase," he said. "What they just enacted was a series of net tax increases."

Meanwhile, budget watchers have wondered what the extension of the millionaire's tax will mean for a Cuomo-appointed panel that has been tasked with coming up with a permanent solution to the state's income-tax system.

Last year, Cuomo appointed a commission to make recommendations for permanent income-tax brackets when the expectation was the temporary ones would expire by 2015. Now, with the temporary rates extended another three years and rebate checks on the way next year, some have wondered what role there will be for the commission, known as the Tax Reform and Fairness Commission.

"They're reconfiguring the entire tax code at a time when they're talking about building a Tax Reform and Fairness Commission to do just that," said Ron Deutsch, executive director of labor-backed group New Yorkers for Fiscal Fairness. "It is kind of bizarre."

Richard Azzopardi, a spokesman for Cuomo, said the income-tax rate extension would not impact the commission's work.

"The tax reform commission continues to meet and is instructed to report its findings to the administration when its work is completed," Azzopardi said.